By Mark S. Nelson, J.D.
The IAASB proposed a new global sustainability assurance standard, ISSA 5000, that would accompany the recently issued IFRS Sustainability Disclosure Standards S1 and S2, but is also designed to be used with other sustainability standards that require assurance. Public comments on the proposal are due by December 1, 2023 (Exposure Draft of Proposed International Standard on Sustainability Assurance 5000, General Requirements for Sustainability Assurance Engagements (ED-5000); Explanatory Memorandum; FAQ).
“Our proposed ISSA 5000 is a crucial step in enhancing confidence and trust in sustainability reporting. This proposal directly responds to the International Organization of Securities Commissions recommendations and complements the work of other standard setters, including the International Ethics Standards Board for Accountants,” said IAASB Chair Tom Seidenstein in a press release announcing the proposal. “Corporate reporting, whether financial or sustainability focused, is more trusted when it receives external and independent assurance based upon globally accepted standards independently developed in the public interest.”
Global standard. ISSA 5000 is designed to be principles-based, applicable to both limited and reasonable assurance engagements, and profession agnostic such that it can be used by both professional accountant providers and non-accountant providers. Because ISSA 5000 is framework-neutral, it can be used with any sustainability framework, including IAASB’s S1 and S2 framework.
ISSA 5000 can be used for sustainability assurance engagements that would require either limited assurance or reasonable assurance. Reasonable assurance is akin to the level of assurance for financial statement audits. That level of assurance is intended to provide greater confidence than would a limited assurance engagement, which IAASB said still provides a degree of “enhance[d]” confidence.
ISSA 5000 also is intended to be used for a wide range of sustainability reporting matters. According to the Explanatory Memorandum: “Sustainability information reported can be very narrow or cover a wide range of sustainability matters, including topics relating to environmental, social, economic, and cultural matters, and the information disclosed about aspects of those topics such as risk and opportunities, governance, processes, strategy, scenario analysis, commitments, targets or historical performance. ED-5000 has been developed to allow its application to reporting on all sustainability topics and aspects of topics.”
With respect to the profession agnostic aspect of ISSA 5000, the proposal would impose two additional requirements. First, practitioners must follow ethics standards that are at least as demanding as those established by the International Ethics Standards Board for Accountants (IESBA). Second, practitioners must be members of a firm that has a system of quality management that is equally demanding as IAASB’s quality management standards.
GHG statements. With respect to other standards, some existing standards may remain relevant despite the potential addition of ISSA 5000. For example, International Standard on Assurance Engagements (ISAE) 3410 for conclusions regarding greenhouse gas (GHG) statements would apply instead of ISSA 5000 for purposes of a separate conclusion on a GHG statement. Moreover, a conclusion in an assurance engagement on a GHG statement may cover information other than sustainability information and, in that case, the additional information would be covered by ISAE 3000 or another applicable ISAE that addresses the specific subject matter. ISSA 5000 contains a set of conforming amendments regarding other standards.